Cyr column: China’s Huawei faces a showdown - in court

Arthur I. Cyr More Content Now

Tuesday

Apr 7, 2020 at 11:14 AM

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Huawei, China’s giant telecommunications corporation, faces growing extremely serious legal trouble in the United States. The current public health pandemic, and related media obsession, make serious attention to other news even more important.

The U.S. Department of Justice has issued a superseding indictment of the China corporation in federal court in Brooklyn, New York, charging the entity and two subsidiaries with violation of the RICO (Racketeer Influenced and Corrupt Organizations) Act. The Feds charge the Chinese with conspiracy to steal proprietary information - trade secrets - from six U.S. technology companies. The firm is also accused of aiding the government of Iran through providing sophisticated surveillance equipment used to identify, monitor and seize individuals involved in protests against the fundamentalist regime.

RICO was originally passed to target primarily members of organized crime families. However, the government for some years has also applied the law to prosecute white-collar crimes. RICO can involve seizing personal assets of those targeted. There is continuing controversy regarding both the fairness and effectiveness of this law, especially outside organized crime cases.

In early 2019, Justice Department officials charged the corporation with bank and wire fraud, violating sanctions against Iran and obstruction of justice. Huawei pleaded not guilty. The new indictment replaces this earlier one, presumably because the government feels a stronger case has now been assembled.

The federal pursuit of this controversial company reflects the wider competition and conflict between China and the U.S., which encompasses politics and national security concerns along with commerce, investment and trade. President Donald Trump has directed harsh accusations and complaints against Huawei, though on this subject he has not been consistent. Last year, he declared the company has significant strengths and might be part of a new trade deal with the government of China.

Huawei is currently the world leader in cutting-edge 5G technology. This term is shorthand for fifth-generation wireless capability, which greatly increases the speed and capacity of wireless transmission.

This 5G is especially important for data transmission. The enormous volumes of data that today can be sent via telecom networks are significant for not only the development of markets by companies, but for governments concerned with national security - and citizens worried about violations of their privacy.

Unifying these varied anxieties and pressures - corporate, governmental and individual - is the understandable fear that Huawei, and therefore China, is accumulating monopoly power. China allegedly could take control over not only international commerce but also literally worldwide communications. That at least is the fear.

Last month, a half dozen China engineers gave a dramatic PowerPoint presentation in Geneva to the International Telecommunications Union (ITU), the organization that supervises communications worldwide. The visitors filled the screen with futuristic imagery. They argued that the current internet is thoroughly outdated and therefore must be replaced with new cutting-edge technology.

The main message was that China should lead this effort. Media reaction, including by the non-tabloid “Financial Times,” reflected alarm.

Reality, however, is considerably more complex. Three decades ago, Japan seemed to be establishing dominance. A possible monopoly of computer chips became an obsessive focus, after Japan’s remarkable success in other sectors.

Arguments for an American “industrial policy” to mimic Japan’s close business-government cooperation grew popular. However, Japan’s dominance proved temporary as others learned to compete effectively.

Resolving current conflicts with China will involve the law, the marketplace and political negotiation. Nations beyond the U.S. must participate. Meanwhile, the pandemic dramatically and starkly demonstrates China’s woeful public health deficiencies.Arthur I. Cyr is Clausen Distinguished Professor at Carthage College and author of “After the Cold War” (NYU Press and Macmillan). Contact acyr@carthage.edu.